WSJ Editors Don't Seem to Like Obama's Plans

#53
#53
droski said:
maturity of the loan or bonds
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So the hole happens at that point. Your point earlier about the type of assets in the program simply happens here rather than at another point. You're still left with the difference between market and book or sale being a liability for someone (likely the gov't). It's still essentially a potential liability for the lender this way. If the gov't eats them now, the bank has washed it's hands of the problem now and can freely lend again. If they still have to accrue to absord the shoddy asset later, we've accomplished little.

There is probably a mechanism to make it work, but it's still going to be a government eats the problem type solution.
 
#54
#54
BigPapaVol said:
So the hole happens at that point. Your point earlier about the type of assets in the program simply happens here rather than at another point. You're still left with the difference between market and book or sale being a liability for someone (likely the gov't). It's still essentially a potential liability for the lender this way. If the gov't eats them now, the bank has washed it's hands of the problem now and can freely lend again. If they still have to accrue to absord the shoddy asset later, we've accomplished little.

There is probably a mechanism to make it work, but it's still going to be a government eats the problem type solution.
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first off they don't have to take it all at once which has been a huge part of the problem. also if we are assuming that these assets are trading below fair value why would they lose money when they mature?
 
#55
#55
droski said:
first off they don't have to take it all at once which has been a huge part of the problem. also if we are assuming that these assets are trading below fair value why would they lose money when they mature?
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we're assuming that those to be absorbed won't recoup value.

They don't have to take the TARP style all at once either. They can make it a rolling system that provides fixed relief and forces banks to help dispose of aided assets before rolling more in. There are myriad ways to do things, but an accounting rule change of that nature is going to be tough for anyone to quantify or avoid the continued fear of the balance sheets.
 
#56
#56
BigPapaVol said:
we're assuming that those to be absorbed won't recoup value.

They don't have to take the TARP style all at once either. They can make it a rolling system that provides fixed relief and forces banks to help dispose of aided assets before rolling more in. There are myriad ways to do things, but an accounting rule change of that nature is going to be tough for anyone to quantify or avoid the continued fear of the balance sheets.
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i agree you have the :"oh sh#t whats out there" problem, but you have that problem with every one of these solutions. i think it's a much more palatable solution than the gov't eating all this stuff even if it is over time. it also is a solution than can be implemented very easily.
 
#57
#57
droski said:
i agree you have the :"oh sh#t whats out there" problem, but you have that problem with every one of these solutions. i think it's a much more palatable solution than the gov't eating all this stuff even if it is over time. it also is a solution than can be implemented very easily.
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implementation is probably easy, but I don't think the big institutionals are going to find banks very attractive thereafter. It just remains a ticking time bomb for them.

In the end, someone is going to have to eat all of this. It's either the banks and their equity holders, the gov't or the broader market.

Really, we're both advocating buying time, which much of this requires. Time will heal the wounds, so either probably works. I simply think the TARP deal draws a line in the sand for investors and lenders. They know where they stand going forward and I believe the world needs that kind of clarity. I'm an advocate of M2M as well, but think it will have a much smaller impact because of the lack of clarity.
 
#58
#58
BigPapaVol said:
implementation is probably easy, but I don't think the big institutionals are going to find banks very attractive thereafter. It just remains a ticking time bomb for them.

In the end, someone is going to have to eat all of this. It's either the banks and their equity holders, the gov't or the broader market.

Really, we're both advocating buying time, which much of this requires. Time will heal the wounds, so either probably works. I simply think the TARP deal draws a line in the sand for investors and lenders. They know where they stand going forward and I believe the world needs that kind of clarity. I'm an advocate of M2M as well, but think it will have a much smaller impact because of the lack of clarity.
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i agree your solution makes more sense for the equity holders and makes them much more attractive to institutional investors. i just don't see congress approving something like this without basically nationalizing every major bank and expecting major hits to the equity and debt holders of the banks. you are basically asking congress to bail out the equity holders and in this environment i don't see them doing that.
 
#59
#59
droski said:
i agree your solution makes more sense for the equity holders and makes them much more attractive to institutional investors. i just don't see congress approving something like this without basically nationalizing every major bank and expecting major hits to the equity and debt holders of the banks. you are basically asking congress to bail out the equity holders and in this environment i don't see them doing that.
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I'm even fine with crapping all over the equity holders. I want new lending to begin and that will be tough for bank leadership with a large overhang out there that they can't truly value. It would also leave capital ratio management in the hands of those same leaders rather than the FDIC or OCC. I don't like that situation even a little bit.
 
#60
#60
BigPapaVol said:
I'm even fine with crapping all over the equity holders. I want new lending to begin and that will be tough for bank leadership with a large overhang out there that they can't truly value. It would also leave capital ratio management in the hands of those same leaders rather than the FDIC or OCC. I don't like that situation even a little bit.
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the best way to see a major rally and to f- the short sellers and get people more confident in investing again is to not wipe out the equity holders. i think it sends a horrible precident to the market that anyone rumored to be in trouble and therefore needs gov't help is going to get at worst massive equity dilution. also my UYG position would be screwed. :)

and i dont' see banks starting to lend again to not prime credits until the mark to market issue gets delt with. i know a lot of bankers that literally are afraid if they issue loans they will be required to write them down almost immediately.
 
#61
#61
droski said:
and i dont' see banks starting to lend again to not prime credits until the mark to market issue gets delt with. i know a lot of bankers that literally are afraid if they issue loans they will be required to write them down almost immediately.
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I agree with this. I think that's an issue that has to be addressed internally with the regulators.
 
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